The Finance (No. 2) Bill 2023 (“the Bill”) was tabled for its First Reading before the Dewan Rakyat (House of Representatives) of the Malaysian Parliament on 7 November 2023. The Bill includes proposed amendments to various tax legislation, including the Income Tax Act 1967, the Real Property Gains Tax Act 1976 and the Stamp Act 1949 (“the Act”).
 
In this article, we shall highlight the main amendments that will be made to the Act when the Bill becomes law and comes into operation on 1 January 2024.¹ It is to be noted that our comments are subject to the Bill being passed without amendments during its passage through the Dewan Rakyat and Dewan Negara (the Senate) of the Malaysian Parliament.
 
Definition of “writing” or “written”
 
A new definition will be introduced to section 2 of the Act to provide that ““writing” or “written” incudes any handwriting, printing, electronic record or transmission which is in an electronically readable form.”
 
The possible ramifications of this proposed amendment will be discussed later in the article.
 
Foreign currency loan
 
Presently a maximum stamp duty of RM2,000 is imposed under item 27(a)(ii) of the First Schedule of the Act on a charge or mortgage, or an agreement for a charge or mortgage, or a covenant being the only or principal or primary security for the payment or repayment of money where the loan is a foreign currency loan or financing is made according to the syariah in currencies other than Malaysian Ringgit. Clause 68(a) of the Bill will remove this cap and stamp duty payable on the instruments mentioned above will be RM5.00 for every RM1,000 or part thereof.
 
Conveyance of property to foreign company or non-citizen or non-permanent resident
 
As announced during the 2024 Malaysian Budget Speech, stamp duty on a conveyance, assignment or transfer on sale of any property (except stocks, shares, marketable securities and certain accounts receivable or book debts) to a foreign company or a person who is not a citizen and not a  permanent resident of Malaysia will be RM4.00 for every RM100 or part thereof of the consideration or market value, whichever is the greater. A new item 32(aa) to the First Schedule of the Act will be introduced to give effect to this measure.
 
Release or renouncement by beneficiary of estate to another beneficiary
 
A new item 29(h)(ii) will be introduced to the First Schedule of the Act to provide that stamp duty on a conveyance, assignment or transfer of any property by way of release or renunciation by a beneficiary of a deceased estate to another beneficiary entitled under the same estate will be RM10.00. Presently, the transfer of property under such a release or renunciation is subject to ad valorem stamp duty as a voluntary conveyance inter vivos under section 16 (1) of the Act. This measure was announced during the 2024 Malaysian Budget Speech.
 
Procedure for appeal against Collector’s decision on assessment
 
Section 39 of the Act which provides for appeals to the High Court against the decision of the Collector of Stamp Duties under section 38A(5) of the Act in relation to assessment of stamp duty is to be amended to clarify that the appeal is to be made “in accordance with the procedure and practice for the time being in force in the High Court.” In this regard, rule 1(1) of Order 55A of the Rules of Court 2012 provides, inter alia, that an appeal under any written law from any decision of any person to the High Court shall be by way of an originating summons. It is however important to note that the 21-day period stipulated in section 39(1) of the Act for filing the originating summons for the appeal remains.
 
Stamping deadline for instruments executed outside of Malaysia
 
Section 42(1) of the Act requires every instrument (other than a cheque or promissory note) executed only out of Malaysia to be stamped within 30 days after the instrument has first been received in Malaysia. The Bill introduces a new section 42(2A) to provide that in the case where the instrument is received by way of electronic transmission, the date of receipt thereof is to be verified by the production of a copy or print out of the electronic transmission.
 
Other amendments
 
The Bill also introduces amendments to align the provisions in the Act with the discontinuation of the use of digital franking machines since 30 June 2021 and postal franking machines for impressed stamps and the use of adhesive stamps on 1 January 2024.
 
Comments
 
From the fiscal aspect, the most significant amendment under the Bill is the proposed abolishment of the RM2,000 maximum duty payable on foreign currency loans and financing made according to the syariah in foreign currencies. For example, a foreign currency loan of an amount equivalent to RM500 million will henceforth be subject to stamp duty of RM2.5 million.
 
By itself, the proposed definition of “writing” or “written” appears innocuous. However the amendment warrants closer examination as to its possible effect on section 4(1) which provides, inter alia, that “… the several instruments specified in the First Schedule shall … be chargeable with the several duties specified in such Schedule”, and the definition of “instrument” in section 2 which states that an “instrument” includes “every written document.”
 
Section 4(1) read together with the definition of “instrument” and the proposed definition of “written” suggests that an electronic record or transmission in an electronically readable form may be subject to stamp duty as a written instrument under the Act.
 
A related point is whether the use of an electronic signature or the acceptance of the terms of an agreement by clicking an “I agree” button or checkbox electronically will suffice to constitute executing a document. In this regard, section 2 of the Act provides that the expressions “executed” and “execution” when used with reference to instruments not under seal, means “signed” and “signature” and section 3 of the Interpretation Acts 1948 and 1967 states that “sign” includes “the making of a mark”.
 
As the Explanatory Statement to the Bill does not provide the reason for the proposed definition of “written” or “writing”, it is not possible to say whether it is the intention of the Government to impose stamp duty on electronic documents. In view of the possible far-reaching effect of the proposed definition inter se section 4, it is hoped that the Inland Revenue Board will provide clarification on this issue as soon as possible.
 
Further, if it is indeed the intention of the Inland Revenue Board to subject electronic documents to stamp duty, guidance should be provided as to how an electronic document is to be submitted for assessment of stamp duty and, if the date of execution is not evident on the document, the evidence required to be provided to establish the date of execution.
 
Article by Lee Ai Hsian (Partner) of the Corporate Practice of Skrine.
 
 

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